Analysts give a thumbs up to Jio nos, say older telcos to face a tough time

MUMBAI/NEW DELHI: Reliance Jio Infocomm (Jio's) first set of financials surprised analysts who say incumbents will be further pressurised to keep pace with the high customer acquistion and the revenue the new entrant is collecting from its subscribers.

"These numbers would positively surprise any experts in the industry. From challenger perspective to have these numbers on debut is a record of sorts. Revenue market share numbers will be majorly redistributed. This will put further pressure on incumbents," said Sanjay Kapoor, former head of Bharti Airtel, India.

Jio, with 138.6 million subscribers, boasts of an above industry average revenue per user (ARPU) of Rs 156.4. The one year old operator said most if its customers preferred the Rsr 399 plan and there few takers for the Rs 149 plan.

"These are very impressive results for somebody's who has been very aggressive in the market. EBITDA of 23.5% in a very short period of time particularly when you're acquiring market share, is very impressive," said Sandip Das, senior advisor at Analysys Mason.

Reliance Jio Infocomm, the telecom unit of Reliance Industries Ltd (RIL), posted a net loss of Rs 270.59 crore for the quarter ended September on revenue of Rs 6,147 crore and surprised the market by reporting a positive earnings before interest and tax (ebit), helped by strong user additions and cost efficiencies.

"The EBITDA margin appears to reflect a network site base of about 125,000 sites, and we expect network opex to increase as the site count increases going forward. However, there will be some upside from reduced sales and marketing opex after the initial launch phase ramps down," said Pankaj Agrawal, partner at telecom and media consultancy Capitel.

https://ssl.gstatic.com/ui/v1/icons/mail/images/cleardot.gifThe telco said that its subscribers will continue to increase and this push has come from the sale of smartphones.

Analysts say that with smaller telcos looking for exit, the revenues will further go up as consolidation gathers speed. "Overall ARPU to go up more, smaller players who dilute ARPU will get consolidated," said Bharat Bhargava, partner, telecom advisory for EY.

On Thursday Tata Teleservices announced its sale of wireless business to Bharti Airtel, beginning the process of exit from an industry known for requiring deep pockets for investments into infrastructure and highly competitive tariffs.

Reliance Jio said it will keep juggling its price plans. "We are right now trying to develop the whole digital services market. We are fairly customer focused and we are trying to get more and more customers to use our services. Make it economical and value added for them," said Anshuman Thakur, head strategy for Jio.

"And then we will see what customers can afford and what they are comfortable with. We will also keep evolving our tariff plans. There is no firm tariff plan that we have for this quarter and the one after that," he added.

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